Gold pares early gains; stronger dollar weighs

By Apeksha Nair

BENGALURU (Reuters) - Gold prices pared early gains and steadied amid a firm U.S. dollar on Monday, albeit trading above a 17-month low supported by concerns over the U.S.-China trade conflict.

Spot gold was steady at $1,213.05 an ounce, as of 0650 GMT, after hitting as high as $1217.85 in early trade.

U.S. gold futures were down 0.2 percent at $1,221.4 an ounce.

"Gold is still very much being influenced by how the dollar is moving. The uptick in gold prices is from the market pricing in how the U.S.-China trade war issues actually play out," OCBC analyst Barnabas Gan said.

Gold prices had rebounded on Friday from a 17-month low of $1,204 per ounce as dollar slipped after data showed U.S. job growth slowed in July.

The dollar had also weakened against the yuan on Friday after the Chinese central bank sought to stabilize its currency.

The greenback, however, regained footing on Monday and strengthened against major peers. [USD/]

China proposed retaliatory tariffs on $60 billion worth of U.S. goods on Friday, further escalating a bitter trade conflict, after the Trump administration sought to ratchet up pressure for trade concessions by proposing a higher 25-percent tariff on $200 billion worth of Chinese imports.

On Monday, Chinese state media lambasted U.S. President Donald Trump's trade policies in an unusually personal attack, and sought to reassure investors worried about China's economy as growth concerns rattled its financial markets.

While the intensifying trade spat has been one of the reason gold prices have been supported above the $1,200 handle, the trade issues have also been playing off into a more expensive dollar rather than higher gold prices, Gan said.

"The more expensive dollar is capping the rally in gold prices. Further downside for gold still appears to be possible especially if the dollar continues to rally."

Spot gold may retest a support at $1,206 per ounce, a break below which could cause a loss to the next support at $1,194, Reuters technicals analyst Wang Tao said.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.26 percent to 794.90 tonnes on Friday.

Hedge funds and money managers added a hefty 13,931 contracts to their net short position in the week to July 31, bringing it to 41,087 contracts, the biggest since records became publicly available in 2006, data showed on Friday.

In other precious metals, silver climbed 0.1 percent to $15.39 an ounce. Platinum edged 0.5 percent higher to $831.10 an ounce, while palladium rose 0.3 percent to $911.97 an ounce.

(Reporting by Apeksha Nair in Bengaluru; Editing by Amrutha Gayathri and Sherry Jacob-Phillips)